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In the area of human capital, RCTs have shed light on issues ranging from the efficacy of remedial classes in primary and secondary in India and Ghana, the effects of raising teachers’ salaries in India, the effectiveness of spending on preventive measures in health in Africa, the effects of labor market policies, and many other policy issues.

Randomized control trials have long been a staple in medicine, especially in testing of pharmaceuticals. In these clinical trials a group of patients is given a specific drug while another group receives placebos. The groups are chosen at random. The application of RCTs in economics has revealed some interesting findings, many of which run contrary to previous received wisdom on education, health, and subsidy programs. (See Duflo and Banerjee, Poor Economics ).

Conventional wisdom has long held that factors such as raising teachers’ salaries, doubling the number of teachers, or improving curriculums, would significantly increase learning. RCTs conducted in India on teachers’ salaries and in India and Ghana on doubling the number of teachers suggest that at least in those settings, the impact of these measures was minimal. However, expansion of remedial education classes turned out to have very significant positive impacts.

RCTs have also been deployed to illuminate important issues in health. For example, low income families typically do not spend nearly enough on disease prevention, largely because of the costs of doing so are beyond their reach even when these costs are very low. One of the RCTs deployed in Kenya by Jessica Cohen and Pascaline Dupas work shows that the health payoffs from free provision of water purification tables and bed nets to prevent mosquito bites (and therefore reduce malaria cases) can be quite significant ( Poor Economics , p.49).

The work of Banerjee and Duflo and others utilizing RCT approaches is also interesting for another reason: it confirms one of the main themes of this book; that poor people generally try to pursue their best interests; they are not at all stupid but lack of information or the presence of misinformation often impedes or precludes their pursuit of their best interests.

Human capital deformation son preference

Economic inequality, economic growth and gender imbalance are all bound up together in one big sticky ball of wax.

Consider, to begin with, China in 2010.

  • Fertility rate was 1.4, far below the replacement rate.
  • People above age 60 were 3.1% population. This percentage will grow rapidly, owing to the one-child per family policy
  • People under age 14 were 17% of the population (in 2000 the percentage was 23%)
  • By 2013 there were 8 people of working age for everyone older than 65. By 2050, there will be only 22 of people of working age for everyone over age 65. It might be said that as result of government policies, China will get “old” before it becomes rich.

In addition China shares with some regions of India, the Korean Peninsula, Afghanistan, Taiwan, Singapore, Vietnam and some nations in Central Europe a strong cultural imperative for male offspring.

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Source:  OpenStax, Economic development for the 21st century. OpenStax CNX. Jun 05, 2015 Download for free at http://legacy.cnx.org/content/col11747/1.12
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